Conte discusses Italy’s spending plans with Merkel

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Brussels,   Italy premier Giuseppe Conte had a breakfast meeting on Friday with Germany’s Chancellor Angela Merkel at a hotel in central Brussels to discuss populist government’s expansionary budget, unexpectedly cancelling a planned press briefing to fit in the meeting.

Conte, who is in Brussels for a summit of European Union heads of state and government, is also trying to arrange meetings with other EU leaders on the sidelines of the summit to get their backing for Italy’s latest budget proposal and avert EU financial sanctions.

Conte told the European Commission on Wednesday he was lowering next year’s deficit target to 2.04 percent of gross domestic product from 2.4 percent. The Commission rejected the 2.4 deficit target in October as a breach of EU fiscal rules requiring member states’ deficits to fall progressively towards a balanced budget.

Italy’s offer of a budget deficit of 2.04 percent is still considerably higher than the 0.8 percent planned by the previous centre-left government and it is not clear if the new target will avert EU financial penalties.

On Thursday, finance minister Giovanni Tria said he would remain in Brussels until a compromise was reached on Italy’s budget.

The Commission has said a high deficit would only add to Italy’s already massive debt burden and the government’s overly optimistic forecasts would not deliver the growth promised after years of austerity measures.

If it does not reach agreement with Italy, the EU executive could launch an ‘excessive deficit procedure’ that can result in fines of 0.2-0.5 percent of GDP, though these have never been levied on any eurozone country.